Weekly Market Update

After a tumultuous January, the market showed signs of stabilization for the second straight week, and we were particularly encouraged by Friday’s market reaction to a much stronger than expected jobs report. Despite fears of Omicron significantly undermining the labor market, January’s jobs report handedly surpassed expectations both around job creation (467K nonfarm payrolls vs. 155K consensus) and wage inflation (5.7% year-over-year growth vs. 5.2% consensus). We suspect that a few weeks ago, such strong employment and wage inflation data, likely would have sparked a sell-off as investors had grown hyper focused on any data release that might compel the Federal Reserve to tighten monetary policy more quickly. However, despite stocks initially moving lower after the strong jobs report, the S&P 500 was able to turn positive by noon and finished Friday up over 1.5% on the week. It is also notable that Friday’s strength was led by the beaten down Nasdaq Composite, even though interest rates broadly moved higher, with the 10-year US Treasury yield breaking out above 1.9%, its highest levels since 2019. Next week, the ongoing fourth quarter earnings season and Thursday’s consumer price index (CPI) are likely to be top of mind.

Earnings Matter

The S&P 500’s fourth quarter (Q4) earnings season is 55% complete and while the Federal Reserve and monetary policy have dominated investor sentiment, corporate profits have quietly done well. For example, the S&P 500 is on pace to register Q4 earnings growth over 29%, well above expectations around 22% (per FactSet). Last week we highlighted how getting past earnings coincided with the end of corporate share buyback blackout periods, and coincidently stock cash flows were quite strong last week as global equities saw $21.8B of inflows during the week ending February 2nd (per EPFR Global).

Ian G. Browning, CFA | Director, Investment Strategies & Shareholder
Peter E. Simmons, JD | President & CEO